Correlation Between Banco Hipotecario and Harmony Gold

Can any of the company-specific risk be diversified away by investing in both Banco Hipotecario and Harmony Gold at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Banco Hipotecario and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Banco Hipotecario SA and Harmony Gold Mining, you can compare the effects of market volatilities on Banco Hipotecario and Harmony Gold and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Banco Hipotecario with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Hipotecario and Harmony Gold.

Diversification Opportunities for Banco Hipotecario and Harmony Gold

0.66

Correlation Coefficient

Banco Hipotecario  Harmony Gold

Poor diversification

The 3 months correlation between Banco and Harmony is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Banco Hipotecario SA and Harmony Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Gold Mining and Banco Hipotecario is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Banco Hipotecario SA are associated (or correlated) with Harmony Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Gold Mining has no effect on the direction of Banco Hipotecario i.e., Banco Hipotecario and Harmony Gold go up and down completely randomly.

Pair Corralation between Banco Hipotecario and Harmony Gold

Assuming the 90 days trading horizon Banco Hipotecario SA is expected to generate 1.69 times more return on investment than Harmony Gold. However, Banco Hipotecario is 1.69 times more volatile than Harmony Gold Mining. It trades about 0.29 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.07 per unit of risk. If you would invest  31,000  in Banco Hipotecario SA on February 6, 2024 and sell it today you would earn a total of  9,300  from holding Banco Hipotecario SA or generate 30.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Banco Hipotecario SA  vs.  Harmony Gold Mining

Banco Hipotecario

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Hipotecario SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Banco Hipotecario sustained solid returns over the last few months and may actually be approaching a breakup point.

Harmony Gold Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harmony Gold sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Hipotecario and Harmony Gold

The main advantage of trading using opposite Banco Hipotecario and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Hipotecario position performs unexpectedly, Harmony Gold can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Harmony Gold will offset losses from the drop in Harmony Gold's long position.

The idea behind Banco Hipotecario SA and Harmony Gold Mining pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.